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States Cut Grants as Students Borrow More Money for College


Aug 12, 2009

Rising unemployment rates and other symptoms of the ongoing recession continue to drive more people to attend college and look for ways to pay their bills, causing an uptick in state and federal financial aid applications. However, states are also hurting for money to meet financial aid requests and other budget demands. According to the Associated Press, 12 states have made significant cuts to state grant programs so far this year, with additional cuts likely. At least anecdotally, these cuts are already leading to more reliance on student loans, especially among groups that, according to a brief published this week by the College Board, may already be finding themselves overburdened with debt.

This week, the College Board released some new numbers on student debt loads and [...]

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89 months ago 0 comments

Student loans have received a lot of attention lately, especially in light of the ongoing recession. As average student debt increases and post-graduate job prospects become less certain, borrowers are struggling to make payments and avoid default on their loans. Meanwhile, lenders are tightening credit requirements or opting out of the student loan industry altogether. While Congress and [...]

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We're nearly a week into August, and for many students, that means that back-to-school preparations have begun. Whether you're picking out notebooks and extra-long twin sheets, or trying to squeeze one last trip or a few more hours of work into your calendar, now is a good time to start looking ahead to the fall term if you're in college. This includes thinking about financial aid. One of the [...]

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After New York Attorney General Andrew Cuomo brought to light questionable practices some college financial aid offices engaged in when creating preferred lender lists for private loans, the fallout was felt nationwide. While colleges and lenders have reformed their practices in the face of new regulations, lawsuits against colleges and lenders are still being addressed.

Yesterday, [...]

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Yesterday, the House of Representatives formally introduced legislation to reshape federal student loans, federal Pell Grants, and other aspects of student financial aid. The Student Aid and Fiscal Responsibility Act of 2009 builds on presidential budget recommendations and features several substantial changes to student aid.

A preliminary breakdown of the bill provided by the National [...]

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Earlier this week, U.S. Bank announced that it would cease to act as a lender for Stafford Loans issued through the Federal Family Education Loan Program. U.S. Bank was the sixth largest participant in FFELP as of 2008, according to the Student Lending Analytics Blog, yet this news has caused barely a ripple.

This is partially due to the fact that the stream of lenders leaving FFELP [...]

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We've previously blogged about the increase in student borrowing shown by the latest data from the National Center for Education Statistics. As more think tanks and other groups begin to analyze this information, additional reports are emerging to provide more details on who is borrowing the most. The latest report comes from Education Sector and bears the title, "Drowning in Debt: The [...]

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Congress has passed and President Obama has signed a bill that provides "technical corrections" to the Higher Education Act, which Congress renewed last year. In addition to offering clarification on several points and correcting minor errors, the Technical Corrections bill also makes some useful changes to federal student financial aid.

Minor clarifications include: Updating the list [...]

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While it falls in the middle of summer on most academic calendars, July 1 marks an important date for financial aid each year.  On July 1, the Education Department switches from the 2008-2009 academic year to the 2009-2010 one, and new federal rules for financial aid go into effect. This means new loan consolidation and repayment options, lower interest rates on some federal student loans, [...]

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With President Obama's proposal to end the bank-based Federal Family Education Loan Program, there has been much speculation on what role would be left for banks in student loans, as well as which banks would be allowed to play that role.  An announcement made yesterday by the Department of Education indicates that at least four banks will remain involved in federal student loans for the [...]

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Last week, we blogged about states and loan companies making cuts to student loan forgiveness programs.  The New York Times initially ran a piece on these budget cuts and has followed up this week with a chart of state loan forgiveness programs and their current financial status.  If you're planning on using one of these programs to cancel some of your student debt after college, you can head [...]

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Loan forgiveness programs have been helping encourage students to enter careers in fields like education and nursing for years.  Such programs are typically offered by state student loan agencies or non-profit organizations, and are often well-publicized to prospective college students.  In many cases, students have borrowed liberally, banking on having a substantial portion of their student [...]

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Yesterday, Congress held a hearing to begin the process of determining the fate of the Federal Family Education Loan Program, the bank-based federal student loan program that President Obama has proposed eliminating in the 2010 federal budget. Voices from both sides of the debate chimed in, with one clear theme emerging: in 2010, student loans are definitely going to change. The questions at [...]

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A little over a week after announcing his plans to gear up for battle with student lenders over the future of the Federal Family Education Loan Program, President Obama has begun calling in the troops.  An e-mail message sent to young Obama supporters by the Democratic National Committee is urging students to speak up in favor of the President's proposal to switch all federal lending to the [...]

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As Congress moves forward with a federal budget plan for 2010, rhetoric is ramping up on both sides of what is proving to be one of the most contentious budget debates so far:  whether or not to eliminate the Federal Family Education Loan Program.  President Obama initially proposed this move in his budget outline, saying that a move to Direct Loans would result in a savings of $48 billion, [...]

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Student loan default rates are rising for both federal and private loans as more recent grads struggle to find work.  The Wall Street Journal reports that the federal default rate is nearing 6.9 percent, the highest it's been since 1998.  Similarly, some private lenders are experiencing default rates that have already nearly doubled in just a year or two.

Loan repayment woes are [...]

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Analyses of the data published last week by the National Center for Education Statistics are already starting to emerge.  The Project on Student Debt has announced that a significantly larger portion of students borrowed private loans in the 2007-2008 academic year than in 2003-2004, according to the NCES survey.

Private loan borrowing increased by 9 percentage points, with 14 percent [...]

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As college costs continue to rise, the percentage of students receiving financial aid also continues to grow.  As of the 2007-2008 academic year, a full two-thirds of undergraduate students received some form of student financial aid, with 47 percent receiving federal aid. This is according to the "First Look" report on the National Postsecondary Student Aid Study published by the National [...]

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Today we move on to the final part of our Understanding Your Financial Aid Award Letter series.  If you were lucky enough to have your entire tuition paid through free money for college, then you can stop reading now.  But the vast majority of students who apply for aid will be awarded at least one less ideal form of financial aid.  Sorting through the rest of your award letter is the tough [...]

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Yesterday, the House and Senate both passed outlines for the 2010 federal budget.  Both propose about $3.5 trillion in spending and preserve many of the priorities of President Obama's budget, including more spending on federal student financial aid. A conference committee will hammer out the differences between the two packages and create a compromise budget.

On financial aid, the [...]

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Earlier this week, the House of Representatives passed a "technical corrections" bill that would make several changes to the Higher Education Opportunity Act passed last year.  Most of the changes are minor corrections, such as fixing typos or clarifying language, but the bill also includes two major fixes that would help borrowers if signed into law.

One of the corrections taken up in [...]

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Student loan default rates increased in 2008, according to a preliminary report released by the Department of Education.  The numbers, which still aren't finalized, indicate an increase from 5.2 percent last year to 6.9 percent this year in the two-year default rate on federal student loans. The increase in default rates is likely due to continued economic difficulties facing new [...]

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Student loans are becoming increasingly difficult for the average college student to obtain.  However, it appears at least one group is able to borrow private loans with relative ease: 80-something hospice patients in Florida.  A student loan scam recently uncovered in St. Petersburg, Florida involved two stolen identities and between $15,000 and $18,000 in loans.

An 80-year-old woman [...]

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On the heels of last week's announcement that Sallie Mae would not participate in the upcoming PLUS loan auction, the student lending giant once again comes bearing news that may ruffle some feathers and potentially hurt its customers' ability to pay for school.

In a move to reduce default rates, Sallie Mae has announced changes to their popular private loan program.  As of next week, [...]

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While April may be the cruelest month, March can be especially rough for students bound for college or graduate school.  Late March and early April are when admissions decisions and financial aid letters roll out for those not immediately accepted or rejected by their dream schools, and around now, things are getting pretty agonizing.  While a large part of March is consumed by waiting, even [...]

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The omnibus spending bill passed by the House of Representatives in February was approved by the Senate last night, and is expected to be signed by President Obama this week.  The bill includes more funding for Federal Pell Grants, fixing the maximum award at $5,350 for 2009-2010, a number that's already been widely publicized.

Other student financial aid programs also receive a [...]

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